Region’s countries need to work together to ensure food security

  • 6/16/2022
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Across the globe, we are witnessing a steep increase in food prices, as well as shortages of some items. This inflation and the broken supply chains, along with other factors, are impacting food security for many countries. According to the World Food Programme, the number of people facing acute food insecurity globally could increase from the current 276 million to 323 million by the end of the year. There are a multitude of factors that have caused this situation and the war in Ukraine is definitely exacerbating the problems. This is why countries in the Middle East need to prepare and develop a common solution. Although not responsible for this situation, emerging countries are always the most at risk. The hard truth is that the solution elaborated by Western governments to face the COVID-19 pandemic is now becoming the main problem. It is inflation more than anything else that is causing this global food crisis. And the main cause of this inflation is the excessive printing of money. During the pandemic, the US Federal Reserve created dollars, or “printed money,” and injected it into the commercial banking system. The Fed purchased more than $4 trillion in government securities with these newly created dollars. Yet, as a result, inflation is now soaring, with catastrophic consequences for people’s lives. This is hitting mature economies too, but emerging countries are suffering worse. And, as the world reopens and faces geopolitical conflicts, global food prices have reached record highs, according to the FAO Food Price Index. In Lebanon, for example, the annual increase in the price of food and beverages has reached 390 percent. In an attempt to curb inflation, the US Fed this week raised interest rates by 75 basis points, its biggest hike in 28 years. Yet, this surge in interest rates increases concerns over global growth and for debt-laden countries and companies across the globe. Following the financial crisis of 2008-09, we lived a decade of cheap debt, with the objective being to sustain and protect growth. The consequence was an increase in debt levels across the world. Today, asset values are dropping and the cost of debt is rising, which increases pressure on developing countries. All this also impacts food prices, simply because the financial burden of debt servicing is much heavier. It really seems that every time Western governments want to solve a problem, the solution becomes the next problem or bubble. Some of these negative factors will dissipate on their own. For example, the sudden surge in demand following the post-pandemic reopening, which added pressure to pricing, is being reabsorbed. Other factors, such as the impact of bad weather on agriculture and fluctuating energy prices, have always been part of the equation. And so, we quickly understand that food supply chains are impacted by many factors. These range from the availability and cost of capital and labor to the cost and availability of fertilizers. They are also impacted by the cost of feeding livestock and the cost of freight. And today, after decades and decades of treaties, agreements and trade arrangements, food supply chains are globally interconnected. This means that a disruption involving any of these factors can negatively impact the entire system. Despite redundancy in the supply chains, we are witnessing a series of negative factors. We need to understand that we are facing the first wave of food price increases and a second wave is coming. Why, you ask? Well, first of all, due to labor shortages and delays in the supply chains of various ingredients (such as fertilizers) needed for crops, shortages are predicted. This means a drop in supply at the same time as demand increases, which will lead to inflationary pressure. The second point is that the price of fertilizers and feed have tripled in the past year. In simple terms, this means that the coming agricultural outputs are costing more to produce and so will need to be sold at even higher prices than today. The war in Ukraine is not the only cause of this problem. But the fact that both Russia and Ukraine are major exporters of wheat, as well as important sources of fertilizer, is accentuating the problem. Also, the lockdowns in China due to the resurgence of COVID-19 add to the pressure. All this points to the necessity of a concerted and common answer in the Middle East. Action needs to be taken in order to face the coming increases and to protect the most vulnerable. The bare necessities need to be made available to avoid a deteriorating situation. According to the UN, between 720 million and 811 million people went hungry in 2020; sadly, countries in the Middle East, such as Lebanon, are among the worst affected.There is nevertheless a broader strategy for the longer term that needs to be implemented. As the disconnect between East and West becomes clearer, GCC countries have a unique opportunity to become a nexus for food security and supply chains. In Africa, the Middle East and Central Asia, there is a pool of resources that can make this zone self-sufficient. There is also capital available to develop infrastructure and there is access to new technologies that can enhance and increase outputs. This strategy should focus on investment and partnerships, rather than aid and grants. This is the only way to make it sustainable and ensure food security to protect future generations. Khaled Abou Zahr is CEO of Eurabia, a media and tech company. He is also the editor of Al-Watan Al-Arabi.

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